Coast Entertainment Holdings Limited (CEH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Ardent Leisure Group Limited Fiscal Year 2021 Financial Results Call. [Operator Instructions] I would now like to hand the conference over to Dr. Gary Weiss, Chairman. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining the call. I'm Gary Weiss, Chairman of Ardent Leisure and I'm joined on the score by Chris Morris and Darin Harper based in Dallas, and Greg Yong based on the Gold Coast. It is my pleasure to present the results for Ardent Leisure Group Limited for the 2021 financial year. This was another very difficult period for the group across a number of fronts. But despite these challenges, we are pleased to report an improvement in our statutory results with a net loss after tax of $86.9 million compared to a loss of $136.1 million in the prior year. Turning first to our biggest business unit, Main Event. The start of the financial year saw many of our centers begin to open or reopen albeit with restrictions. And we also saw the opening of our most recent center at Wesley Chapel in Tampa, Florida. Momentum started to build, and we were recovering steadily until the onset of the second wave of the pandemic in the U.S. in November. As the second wave wind and an accelerated vaccination program rolled out in the U.S., we have seen a significant recovery in Main Events business, particularly since March of this year. As we will hear from Chris and Darin, the business is trading well and Main Events is well positioned from both a capital and liquidity perspective, which will see the resumption of our development pipeline which had been temporarily paused at the beginning of the pandemic. Recovery at our Theme Parks businesses in Australia continues to be hampered by ongoing international and domestic border restrictions and snap lockdowns, many of which have been instituted around school holidays, which are, of course, critical trading periods for our business. We remain optimistic that with a clear focus now in Australia on vaccinations and with the federal government's plan to open up Australia when stated vaccination thresholds have been attained, that our Theme Parks business will benefit from the similar pent-up demand evidenced in the United States by the strong recovery at Main Events and on the performance of regional theme park operators. Ardent is extremely fortunate to have highly experienced and dedicated leadership in place at both of our businesses. In the U.S., the Main Events team headed by Chris and Darin has been simply inspirational and have led from the front, and they and all the rest of the team have executed superbly and to the highest standards. In Australia, Greg Yong and his team are similarly led by example during these most difficult and challenging times and have continued to drive excellent execution throughout. Greg had been Chief Operating Officer at our Theme Parks business for over 2 years working alongside John Osborne until April this year, when John unfortunately, due to personal circumstances, stepped down as CEO. Greg brings a wealth of experience in the theme park industry, both in Australia and overseas, and has assembled a great team. Before turning to the financial results, I just want to call out at this stage John Osborne's contribution to Ardent. John became CEO of our Theme Park division in November 2018 and has overseen the massive rehabilitation of Dreamworld since that time. His contribution has truly been of herculean proportions, and John has been and continues to be a valued and trusted colleague and I want to acknowledge on behalf of all of us at Ardent, John's outstanding leadership during his tenure. In summary, Ardent is well placed to emerge strongly from the pandemic. Recovery is well underway in our U.S. business and we believe that recovery in our Australian operations will follow suit in due course. The Board believes that there exists considerable scope to rebuild shareholder value over the medium term. I now hand over to Darin to take you through the financial results for the group.

Thank you, Gary, and good morning, everyone. Let's start on Slide 2. As Gary mentioned, our financial results improved significantly during FY '21 despite ongoing impacts of the pandemic during the year on both businesses. The group's net loss improved nearly $50 million for the prior year, driven by strong improved performance at Main Events as well as the reduction of certain specific items. Revenue for the group of $390.7 million was down $7.6 million versus the prior corresponding period, reflecting the impact of an extra operating week in the prior year as well as a decline in Theme Park revenues due to ongoing border restrictions and lockdowns. Excluding the impact of the 53rd week in the prior year, revenue would have been up nearly $8.5 million. This increase was driven by strong Main Event revenue performance versus prior year, in particular, a very strong second half of fiscal 2021, which I'll get to here in a moment. Group EBITDA, excluding specific items, was $30.6 million, an increase of $24.9 million versus the prior year. Excluding the impact of the 53rd week, EBITDA would have increased $30.7 million. This increase was driven by the strength of the Main Event business during the year, while Theme Park EBITDA and group corporate costs remain relatively flat. Momentum of the business really pivoted in the second half of FY '21. Full year revenue of $390.7 million was comprised of $137.6 million in the first half of FY '21 and nearly doubling to $253.1 million in the second half of the year. Revenue in the second half of the year approximated the revenue generated for the second half of FY '19, which was pre-COVID. Furthermore, full year EBITDA, excluding specific items, was $30.6 million, and this was comprised of a $19.8 million EBITDA loss in the first half of FY '21 and a positive EBITDA result of $50.4 million in the second half of the year. EBITDA generated in the second half of FY '21 was $10 million higher than the second half of FY '19, again, pre-COVID. Overall, we're very pleased with the performance of Main Event during FY '21 with revenue and profitability momentum growing during the second half of the year. Main Event revenue on a U.S. dollar basis increased $34.1 million to $266.9 million for the full year. Excluding the impact of the 53rd week, Main Event's revenues increased $43.5 million versus FY '20. This reflects the impact of new centers opened during FY '20 and FY '21, the lapping of initial closures of centers in March 2020, and the growth in constant center revenues during the second half of the 2021 fiscal year. The performance in the second half of FY '21 reflects not only the robust consumer demand here in the U.S., but it also reflects the success of our strategic initiatives we have built upon over the last 12 months. All 44 centers were reopened by June 2021, with most lingering restrictions being lifted throughout the second half of the fiscal year. Furthermore, we opened a new center in Wesley Chapel, Florida, in July 2020, and this location has performed incredibly well, reaffirming our real estate strategy moving forward. The Theme Parks business continues to face headwinds from border restrictions and lockdowns, resulting in Theme Park revenue being down $18.5 million for the year. Excluding the impact from the 53rd week, revenues were down $15.9 million. Theme Park EBITDA was a loss of $10.3 million, which was a $2.6 million decrease versus the prior year or a $1.4 million decrease, excluding the impact of the 53rd week. Strong annual pass sales, a lower cost base, a disciplined approach to capital spending, and the JobKeeper subsidy have mitigated the overall impact on performance and cash flows. Greg will walk through the performance of Theme Parks in more detail here shortly. Moving to Slide 3. First, I remind you that our statutory results for FY '20 include 1 additional operating week due to FY '20 being a 53-week year. Given the overall noise from COVID-19 beginning in the second half of FY '20 and throughout FY '21, we have not presented FY '20 on a pro forma basis, but we'll call out the impact on revenue and EBITDA as appropriate during the call. In addition to the factors previously discussed that drove our performance during FY '21, I will also note that our group corporate costs remained relatively flat year-over-year. Additionally, our net borrowing costs increased due primarily to the full period of interest with regard to the RedBird investment, as well as other borrowing costs incidental to that transaction and associated with the QTC loan. Lastly, the income tax line reflects the fact that certain tax losses and deductible temporary differences have not been recognized as deferred tax assets and thus not recorded as an income tax benefit during the period. The economic benefit of these deferred tax assets remain. However, the recognition is not currently reflected. On Slide 4, as previously mentioned, we have presented the key specific items impacting our results. The $4.1 million noncash impairment charge as well as the $4.1 million in restructuring and nonrecurring items were both amounts previously recorded in the first half of FY '21. And as a reminder, a breakdown of the specific items by business unit is provided in Appendix 1 of this presentation. Let's move ahead to Slide 6 and discuss Main Event's performance in a little bit more detail. On a U.S. dollar basis, Main Event revenue, excluding the impact of the 53rd week, increased $43.5 million to $266.9 million for the full year. The revenue performance for the year reflects the impact of new centers opened during FY '20 and FY '21, the lapping of initial closures of the centers in March of last year, and the growth in constant center revenues during the second half of the year. For the second half of FY '21, revenue for Main Events in U.S. dollars was $176.7 million, which was approximately $98 million higher than the second half of FY '20, and was over $18 million higher than the second half of FY '19, which was fully pre-COVID. While constant center revenue measured on a year-over-year basis through February 2021 was down, beginning in March 2021, revenue began to significantly recover. On a 2-year basis versus pre-COVID revenue, Main Event began generating double-digit sales results, with March up 23%, May up nearly 40%, April up 19% and June up nearly 38%. This sales performance, coupled with improved margins, resulted in strong EBITDA generation. EBITDA, excluding specific items for the full year, was $36.5 million, which was up over $26 million versus prior year, excluding the impact of the 53rd week. EBITDA excluding specific items generated during the second half of FY '21 was nearly $46 million, which was almost $54 million higher than the second half of FY '20 and was $10.5 million higher than the second half of FY '19, again pre-COVID. This resulted in EBITDA margins for the second half of FY '21, up 26%. We have generated record-breaking sales and EBITDA performance over the last several months, and this has provided additional strength to our already solid balance sheet and has given us strong momentum heading into FY '22. With that, I'll now turn the call over to Chris Morris.

Okay. All right. Thank you, Darin. Thanks, everyone, for joining us this morning. Well, 2021 was certainly an unusual year. However, despite the unprecedented challenges posed to the business, I'm very proud of what our team accomplished. We generated record-breaking sales and profitability in the second half of fiscal '21. And to date, the positive momentum has continued into our 2022 year, highlighting the remarkable strength and unit economics of our business. As Darin said earlier, this performance reflects not only the robust post-recovery consumer demand for out-of-home entertainment here in the U.S., but also reflects the success of our strategic initiatives and the pre-COVID sales momentum we have built upon over the last 12 months. Since March, conference center revenue performance has been significantly ahead of prepandemic levels averaging over 30% growth from the same period in fiscal 2019 and the positive momentum has continued into the start of the fiscal 2022 year with conference center revenue up over 40% in July and 26% in the first 2 weeks of August. We are incredibly proud of these results and believe they are a testament to the quality of work being done by our teams all across the country as well as our strategic priorities. As a reminder, prepandemic, conference center revenue performance was up over 4% in both Q2 and the first 9 weeks of Q3 of the fiscal 2020 year. This performance was preceded by record-breaking operating metrics, which we believe were contributing -- which were key contributors to growing momentum in the business prior to the pandemic and continue to propel our business today. Additionally, we built upon this momentum during the F '21 year through several key initiatives, including world-class operations execution for guests and team members through our Play Smart. Place Safe initiative. We implemented strong retention initiatives from frontline team members to key leaders within the organization. We continue to make select strategic investments in entertainment, technology and marketing, and we successfully opened a high-volume center in the Wesley Chapel, Florida market. Strong top line performance during the second half of the year led to significant flow-through, which drove historically high profitability. EBITDA during the second half of fiscal '21 was nearly $46 million. And even more impressive than that, for the trailing 5 months ending July '21, EBITDA was approximately $60 million. In fiscal 2021, 39 of our 44 centers were open for at least 11 of the 12 months. And all 39 had positive 4-wall EBITDA and for the full fiscal year averaging $1.8 million per center. Because of the strong financial performance, we currently have ample liquidity to meet the needs of our business and fund near-term strategic priorities. Between our cash balance and our line of credit, we ended the year with nearly $100 million of available liquidity. Based on the performance of our business, our confidence in our long-term strategic direction, and a successful track record of generating strong returns in new center openings, we continue to be bullish with respect to growing our unit base. We currently have 4 units under construction set to open this fiscal year. We are targeting between 6 to 8 openings in fiscal '23 and expect to open between 8 to 10 new centers in fiscal '24 and beyond. So in summary, we're pleased with the performance of our business and continue to believe we are well positioned to further solidify our leadership position. While we know near term top line results will be subject to ongoing COVID-19 challenges, we are very optimistic about where we've positioned ourselves in this category, and we remain confident in our ability to continue to grow moving forward. We have an incredibly strong and resilient brand with plenty of white space to grow for many years to come. We are well capitalized from a liquidity and capital perspective, and we'll leverage this capital position to drive our new center growth strategy during F '22 and beyond. With that, I'll turn it over to Greg.

Thanks, Chris, and good morning to everyone listening today. In particular, I just want to send my thoughts to all of you that are listening from New South Wales and Victoria and enduring lockdown during this difficult time. We certainly miss you, and we're looking forward to having you back on the Gold Coast, hopefully, in the very near future, but we expect that to be at least around Christmas time this year. Starting with Slide 12. Revenue for FY '21 was clearly impacted by missed trading days as a result of the reopening in September, several periods where we were unable to trade due to local lockdowns, but moreover, an inability to reach our international and no interstate guests for obvious reasons. As you can see, material adjustments have been made to the cost base in order to counter these factors, and I'll speak to those cost base changes in a bit more detail in the upcoming slides. Despite these challenges, we have seen some promising signs as a result of the strategies we are implementing to optimize our local visitations. These positive signs along with our focus on cost discipline, the JobKeeper wage subsidy, has somewhat mitigated the impact of difficult macro conditions. Turning to Slide 13. I want to assure you that our team remains vigilant and are absolutely focused on providing a COVID safe environment in all of our venues. We work very closely with Queensland Health, and they're very complementary of our control measures. As I mentioned earlier, the impact of COVID continues to adversely impact our revenue. Since our reopening in September, we've seen continual lockdowns, restrictions and state border closures. These have been further exacerbated by the unfortunate timing of these outbreaks. In December and January, typically our most popular trading period, Sydney and Brisbane were locked down. At Easter, again, as you all know, another critical trading period for us, Greater Brisbane went into lockdown. And more recently, in June and July, we've seen lockdowns across Southeast Queensland, Cannes, New South Wales, Victoria, South Australia, the Northern Territory and now in the ACT. And as I'm sure many of you can understand that persists in many of those regions to this day. What this means for us is that we really are seeing a 3-speed business model in the organization. Weekdays are pretty quiet at the moment, given the available market is very limited. Weekends, much better capability there to see school-age locals as well as all the visitors that we expect to get from the important catchments to the north of the parks. And in school holidays, when we're trading without any latent restrictions, we're seeing very good results. In particular, we're seeing results that are as good or better than pre-COVID numbers when weather and all of those other restricting factors are lifted. On Slide 14, we've gone through and discussed several of our revenue initiatives. Given the challenges, we've made some changes to how we market interstate regions and moreover, how we utilize those interstate distribution channels. The early signs from this work have been very positive, and that we've derisked significant marketing spend, and ultimately, we've achieved a more favorable return for those distribution dollars. As alluded to in earlier presentations, we've installed a new online ticketing system, and we continue to work through optimizing our online footprint. This includes refining our web presence with a very particular focus on mobile and being very analytical about how we can further enhance our path to purchase. Once again, the early work is showing very pleasing results, and suggests that we're able to make compelling headline pricing, but also move guests up through the value chain into higher yielding partners and higher-yielding experiences. We're very happy with this progress, but I'm excited by the fact that we're very early on in this journey, and I think there is a significant upside still to be realized. What does all this mean? Well, I think these initiatives are starting to bear fruit. If you look through these results, you can see annual pass sales units were up over 45% on the prior comparable period on a similar number of trading days. Local attendances were at 80% of pre-COVID levels in school holidays, and this includes the period where the parks were closed due to lockdown. This is helping us to build a broader local base. And you can see here that the total active pass holder base at year-end was up 37.7% on FY '20. The clear opportunity for us is to give these guests compelling reasons to keep visiting, to spend while they're in the park and ultimately to renew that pass. We think we've got the right plans in place around our new attractions, our wonderful friendly service, and our people really do care about how that experience happens to make this a reality. We're also deploying new technology for in-park experiences. A good example of this is our contactless anytime F&B ordering. It helps guests make a better controlled process around their day. It helps take pressure away from our counters and importantly, delivering meaningful increases in average checks compared to traditional ordering. Turning to Slide 15. While revenue is key, particularly as the recovery gains momentum, we have been through, and we're continuing to go through this time very challenging trading conditions. On Slide 15, we talk specifically to the focus that our entire team has on cost discipline and on cash. Importantly, and I want to stress this, we would never make cost adjustments that impact the safety of our team, our guests or our animals. At the same time, we are trying to be innovative around cost as we can be, and we think about that in the same way that we think about being innovative around revenue. This is about making sure that any consequential efficiencies that we deploy have 2 key objectives. Firstly, they cannot materially impede the recovery when sentiment improves. And secondly, they should be value accretive when that improvement comes. A good example of this is what we're doing at WhiteWater World in terms of moving that to a seasonal operation. In my experience, there isn't a water park in this country that's profitable through the winter months in or out of COVID. The cost savings from this decision are significant. And moreover, the ability for us to get critical maintenance and improvement work done mean that when we reopen the guest experience will be incredible. I'm walking that water park every day at the moment, and I can tell you it is in great shape, run by the best aquatics team in the country, and I've got no doubt that we'll have a fantastic season there. Similarly, we've made some tough decisions to rightsize our attraction count based on our projection around rider throughput and to ensure that we have a residual fleet of safe, reliable and contemporary attractions that can be maintained to a very high standard. I want to assure you that all these decisions get the due consideration and the care that they deserve. Whilst it may seem counterintuitive, these decisions are about guests first and foremost. This is about using the resources that we have available to provide the very best guest experience. We contend that the savings that we've made from many of these initiatives have already and will continue to be better invested into more meaningful experiences that families will enjoy. We are absolutely thinking about and working on exciting new rides, but we're also working over time on making sure that when we do this, we involve pragmatic, experienced people, who have grown up in the industry, to make sure we get these decisions right. In relation to cash, we have stated the cash position at the balance date of 29th of June. I can advise that cash available to the Australian business today is around $15 million with our loan facilities having undrawn capacity of around $44.9 million. While we do expect some material cash outflows as we complete Steel Taipan, we are towards the end of this project and taking a very vigilant approach to any other capital or operating expenses in order for it to preserve our cash reserves at this time. Turning to Slide 16. We continue to work on the Accommodation Precinct adjacent to Dreamworld, and we believe this will be a significant addition to our master plan. As you all know, we own our land, and we're pursuing several prospects in relation to what we consider a surface holdings. The announcement of the Brisbane Olympic Games and the proximity of associated venues creates further potential for higher and better use opportunities and we're taking all of this into account when we think about how we're going to unlock that land value. We're obviously unbelievably excited about the Steel Taipan rollercoaster. It's on schedule to open at the end of this year. Obviously, we're keeping a close eye on any COVID-related delays. But at this point in time, we still believe we'll make the opening date of December this year. On Slide 17, we talk about events. Frankly, we're really excited about this event program. We've seen better than anticipated results through guest feedback or financial performance in each and every instance. This comes down to our team taking a very methodical approach to these activations. We are clear about our objectives and given many of our senior team are very much proxies of our target guests, I think we're making very congruent choices around what families think is a great day out. Monster Trucks is a fantastic example, something that you would think is a little less field for Theme Parks, but we felt it was right from the very statutory market. I can tell you that it was so right that after the first day of shows, we worked through the night, clearing more space to create additional standing area for hundreds of more guests to fit in on day and to fit in throughout the show period. Winterfest and Happy Halloween are events that we're quickly becoming famous for. Both of them have ample attractions for families to take those special memories, whether it's ice skating for the first time ever or getting that fantastic special family side on the park on a beautiful Halloween night. On Tuesday, we announced the brand-new event for this coming September called Spring County Fair, and we expect that to be just as much of a hit. I'm particularly excited to be working with other operators in the leisure industry, who have been doing it really tough. To have the show bag exhibitors from the ECA, to have the people that look after the best baby animal presentations in the country, partnering with us is a nice show of unity in what a particularly difficult time for them. This will all be further supplemented by mutually beneficial partnerships with several local, but very high-profile craft breweries and distilleries along with the food program that we think is best-in-class. All of this adds a brand-new dimension to the event. On Slide 18 and 19, you can see some updates from Steel Taipan. And again, we just can't wait it to open. I truly think this will be the best roller coaster experience in Australia, several [indiscernible] world's first and something on that for everyone. On Slide 20. At SkyPoint, our team has done an incredible job in a business that has been very much previously targeted towards international visitors. We've repositioned given the current times and we're doing all we can in terms of activity to drive repeat attendances into that venue. It's a solid business, and we're doing very well prior to the pandemic, and we expect there will be a rapid return to historical performance when the conditions allow. In closing, and on Slide 21, there is no doubt that we continue to be affected by this 1 in 100-year pandemic. The national vaccine rollout and importantly, the state government responses to this are critical to our recovery. I am absolutely buoyed to listen to the fantastic results coming out of Main Event. And as Gary mentioned, moreover, the positive results coming out of the regional Theme Parks and out of our out-of-home leisure sectors across the U.S. There is no reason that we shouldn't see the same rebound here in Australia. The good news is that our revenue plans that I've outlined earlier are already working, when conditions allow and the transformative work that we've taken and we'll continue to take on costs, will accelerate performance as the national recovery occurs. I'd also like to reflect Gary's comments and acknowledge a significant contribution from our former CEO, John Osborne, who led the division through very much of this very difficult period and was instrumental to securing the critical support from the Queensland government. We're incredibly lucky here to have an intelligent professional, disciplined, executive group and a very talented frontline team. Through their efforts, financial performance has been contained in what are some of the most difficult economic conditions on record and we're very pleased with the performance to date. Thank you, and I'll now hand back to Darin.

Thanks, Greg. I'm just going to touch on a few points on the next few slides, and then we'll open up the line to Q&A. On Slide 23, I'll quickly draw your attention to the net debt for the group of $81.6 million, which is an improvement of $35.6 million from December 2020 and nearly flat with June of last year. The cash flow generated from the Main Event business during the second half of the year improved the liquidity position of the consolidated group. Turning to Slide 24. The group has a cash balance of $115 million as of June 2021, and it's comprised of $18.1 million and $96. 9 million of cash available to the Australian and U.S. businesses, respectively. Furthermore, there is a USD 25 million undrawn revolving credit facility available to the U.S. business, as well as a AUD 49.9 million available to the Australian business through the QTC loan. The amount of debt outstanding for the U.S. business at June 2021 was $138.3 million, which reflects a full paydown of the $25 million revolving line of credit during FY '21. Given the performance of the business and the additional liquidity generated over the second half of FY '21, the U.S. business is well capitalized and in a good position in terms of covenant compliance moving forward. Also, as a reminder, under the terms of the group's finance and facilities, cash and debt held by the Australian and U.S. businesses are subject to separate ring-fencing provisions whereby each business cannot access cash or facilities held by the other. Lastly, in view of the Board's previously stated intention to continue to invest in Main Event and Theme Parks, the Board has decided not to declare a dividend for FY '21. Finally, on Slide 25. As noted previously, the group has taken its recurring cost base of over $16 million to a run rate of approximately $6 million over the past 2 years, due to significant efforts to permanently reduce the cost structure given the changes to the business. This concludes our prepared remarks. And with that, we'll now open the call to questions.

[Operator Instructions] Our first question comes from Allan Franklin with Canaccord Genuity.

Great to see the results. Just hoping if you could provide some context on the Main Event business just in terms of some detail what you're seeing. I presume there's growth across all the different states, but perhaps if there's some sort of delineation you can discuss there? And just secondly, on the uplift to what extent are people spending more. Is it growth in foot traffic? And I guess, how has this sort of changed into June and July?

Allan, this is Chris. Yes, more than happy to take that question. So with respect to regional differences, to be totally honest, there have not been any material regional differences across the portfolio. This week, we might see some varying results, but there's been no consistent trend that, that would -- that, that worthy of discussion. So we've really seen just an overall lift in our business across the entire portfolio. In terms of foot traffic versus price, this is all driven by foot traffic. So there's not a noticeable difference in our PPA year-over-year. So the growth that we're seeing is driven primarily from foot traffic.

Yes. Perfect. Sorry go ahead.

No, it's all right. Go ahead.

Sorry, I was just going to say, just in terms of the outperformance relative to peers, what do you think is driving this? I mean, obviously, you -- it's obviously the category is going very well, but it looks like you've been outperforming Dave & Buster's in particular, on an ongoing basis over the last sort of 9 months or so. What do you think is driving that? What have you been doing in terms of sort of marketing initiatives as well, please?

Well, I think the first thing to note is pre-pandemic we were outperforming our competitors. So we had a lot of momentum in the business. I referenced it in the prepared remarks today, heading up to right before the pandemic, our comp store sales for -- really for like 7 months were gaining momentum and outcompeting our competitors including Dave & Buster's. And so we feel like that a lot of the things that we focused on to drive those results to steal share in a competitive market, continue to support the business today. So we don't look at our performance against our competitive set currently as being anything unusual that's related to the pandemic. In terms of specific strategies, first and foremost, our focus on safety as we said from the very beginning that we're going to lead from the front on our Play Smart, Play Safe campaign, and we did that, and we feel like that, that really made a big impact in the minds of the guests early on. And we think that, that has carried throughout our performance, throughout all of the recovery. We've continued to invest in our marketing messages at the same rate that we were doing before. We have very relevant marketing aimed at the right target audience, and we think that, that positioning and that focus has continued to help us perform. The ops execution and the ops engagement from the very beginning, what drove our performance pre-pandemic. We -- in large part was driven by the superior execution that we were delivering in our centers all across the country. And we think that, that has continued. So we don't think it's just 1 thing. We think it's a number of different things that have all led to just a consistent track record of outperformance.

Yes. Great. Just 1 last 1 and then I'll jump back in the queue. But just fairly material cash generation over the last few months. Just how you're thinking about cash generation supporting the rollout in the near term as opposed to, I guess, striking up an enlarged debt facility?

I'll let Darin take that.

Yes. We feel like we're in a good position with our current liquidity balance as well as how we project the business moving forward. While -- look, we're always going to be opportunistic if there's a way to have a more efficient capital structure moving forward, but in terms of supporting our new center growth, we feel like we're in a really good position really through the end of FY '23, pending any opportunity for us to really amp up growth even more. But based on kind of what we've communicated in terms of our growth plans, we should have an existing capital structure that can support that.

Our next question comes from Roger Coleman with [indiscernible] Limited.

Chris, congratulations on great efforts. I'm just going through the numbers. The average revenue per center, why do you think it's running on, on an annualized basis? We don't really see the seasonality in those, just plotting the second half only.

Thank you for the comments. Yes. No, I'm right here. Can you hear me?

Yes.

Yes. Okay. Thank you for the time.

What is a -- have your cracked like $10 million per center annualized adjusting for the seasonal run you've got now?

Yes. On an annualized basis, our revenue is at $10 million per center. It's kind of where we are on an annualized basis. So -- and as we said in our remarks -- yes, go ahead.

Right. So what's fixed to variable ratio? I mean this 25.9% second half EBITDA with the increased foot traffic and expenditure, the margin should rise further in fiscal '22. That's the question.

Yes. Go ahead, Darin.

Yes. Yes, this is Darin. Yes, we -- yes, look, if we maintain at these sales volumes, yes, absolutely, that's going to be incredibly accretive to margins. With our high operating leverage in this business, every additional dollar of incremental revenue growth for an existing center is going to flow through quite a bit. So yes, if we maintain these levels, yes, incredibly accretive.

Is it like a 70% drop-through, 80%? What's your guess?

Yes, 70% is a fair number to use.